Silicon Valley Bank failed on March 10 after depositors hurried to withdraw money amid anxiety over the bank’s health. It was the second biggest bank failure in U.S. history after the collapse of Washington Mutual in 2008.
Just days after Silicon Valley Bank was shut down by regulators, the federal government announced all of the bank’s customers would get their money back. This prompted questions on social media about whether taxpayers would foot the bill.
Is taxpayer money being used to cover the deposits at Silicon Valley Bank?
No, taxpayer money is not being used to cover the deposits at Silicon Valley Bank.
WHAT WE FOUND
On March 12, the heads of the U.S. Treasury Department, Federal Reserve Board and the Federal Deposit Insurance Corporation (FDIC) made it clear in a joint press release that taxpayers would not bear the burden of covering Silicon Valley Bank deposits.
The Federal Reserve announced it will protect all money for account holders, regardless of their balance, using funds from the Deposit Insurance Fund. This is a program that is funded by fees paid by banks and interest earned on government bonds, not funds from taxpayers.
“Depositors will have access to all of their money starting Monday, March 13. No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer,” the federal agencies said.
The FDIC provides insurance to banks. The standard deposit is insured up to $250,000 per depositor. But Silicon Valley Bank catered to start-ups and small businesses, many of which had millions of dollars in their accounts — well above the FDIC insurance limit of $250,000. Streaming media company Roku, for example, said it had roughly $487 million of its $1.9 billion in cash tied up with Silicon Valley Bank.
President Joe Biden, U.S. Rep. Jeff Jackson (D-N.C.) and U.S. Rep. Andy Barr (R-Ky.) have all said that taxpayer money would not be used to cover Silicon Valley Banks’ deposits. Instead, they explained that the deposits were being paid for using funds from the Deposit Insurance Fund.
“No losses will be — and I want — this is an important point — no losses will be borne by the taxpayers. Let me repeat that: No losses will be borne by the taxpayers. Instead, the money will come from the fees that banks pay into the Deposit Insurance Fund,” Biden said.
“It is noteworthy to say that, with the — with the — the exception the systemic risk that the FDIC, the Treasury, and the Fed invoked here, that taxpayers, at least for now, that taxpayers are not bailing out SVB depositors or these other uninsured depositors. It is an assessment on the banks through the deposit fund,” Barr said.
The FDIC says it will require banks to pay a special assessment to help recover any losses.
The Associated Press contributed to this report.